Groups battle federal freeze on charity assets

WASHINGTON -- The Treasury Department faces a legal challenge over its use of an emergency power to freeze the assets of U.S. charities based on suspicions — and without formal charges — that their money aids groups tied to terrorism.

Four charities have had operations "blocked pending investigation" by Treasury under authority granted by President George W. Bush after the 9/11 attacks. The authority, provided under the International Emergency Economic Powers Act, lets Treasury freeze a charity's operations indefinitely if officials have "reasonable basis" to suspect its money or activities benefit terrorists.

For the first time, a federal court in Ohio will hear arguments May 1 on whether that authority is constitutional. The challenge, backed by civil liberties and open government groups, focuses on Treasury's actions against KindHearts, a Toledo, Ohio-based relief group that works in the Middle East.

"The government is saying it can take a U.S. corporation and shut it down indefinitely … without any due process," says Hina Shamsi, an American Civil Liberties Union lawyer representing KindHearts. "No one's saying 'don't go after terrorist financing' … but this has the opposite consequence. It has a tremendously chilling effect on humanitarian aid in areas where the United States has a strong interest in changing public opinion about itself."

KindHearts' assets were frozen "pending investigation" in February 2006. Treasury said in a statement at the time that the freeze was based on unspecified reports that KindHearts gave support to Hamas, a designated terror group, under the guise of providing aid to Palestinian causes.

Treasury also said KindHearts was a successor to two other charities shut down for supporting terrorists: the Holy Land Foundation and the Global Relief Foundation.

Treasury has not listed KindHearts as a Specially Designated Global Terrorist organization — the formal finding that usually is the basis for sanctions. Treasury spokeswoman Heather Wong said the department could not comment, noting the litigation.

In a filing in the KindHearts case, Treasury says the ability to freeze an organization's assets pending an investigation is an important anti-terrorism tool used only when the department has to ensure an organization won't "attempt to hide or divert account funds" before an investigation is finished.

KindHearts is one of four U.S. charities Treasury has frozen "pending investigation." The others were given terrorist designations once investigations were concluded — a process that took eight months or more.

A 2004 staff report by the 9/11 Commission raised concerns about the constitutionality of freezing an organization with no formal finding of wrongdoing.

"Blocking of assets 'during the pendency of an investigation' … raises particular concern in that it can shut down a U.S. entity indefinitely without the more fully developed administrative record necessary for a (terrorist) designation," commission co-chair and former representative Lee Hamilton, D-Ind., testified to Congress.

KindHearts asserts in court filings that charities can't rebut whatever evidence led to the suspicion they support terrorism because that material often is classified. KindHearts says Treasury's threshold for suspecting a charity aids terrorists is so low that a group can be implicated even when its money goes to something seemingly innocent, such as building schools, if the work is done in areas controlled by a terror group, such as Hamas.

Treasury says organizations get unclassified summaries of the suspicions that prompt asset freezes, and judges can be allowed to see the secret evidence if the freeze is challenged.